Choosing how many hours to study

The rule for any "how much" decision is to keep going while the next unit adds more benefit than it costs, and stop where the two are equal. On the graph, marginal benefit slopes down (each extra hour helps a little less) and marginal cost slopes up (each extra hour costs more, perhaps in lost sleep or work). They cross above S2.

At S1 the marginal benefit curve sits above the marginal cost curve, so one more hour is still worth it: MB > MC. At S3 the order flips and MC > MB, so that last hour was a net loss. Only at S2 does MB = MC, which means total net benefit is as large as it can get.

Each choice

• A. Past S2 marginal benefit is still positive; the curve stays above the axis. Studying more still helps, it just helps less than it costs. Confusing "net benefit is negative" with "no benefit at all" leads here.
• B. This reads the curves backwards. At S1 the marginal benefit curve is the higher one, so benefit exceeds cost and the student should keep studying.
• C (correct). Stop at the hour where the next one would cost as much as it gives back.
• D. At S3 the marginal cost of the last hour is above its marginal benefit. Someone choosing this may think more study is always better, but those hours past S2 lower net benefit.
• E. The marginal cost curve slopes upward, so each added hour costs more, not less. This is a slip in reading which way the curve tilts.